1984 (8) TMI 46 - HC - Income Tax

Summary

Issues:
1. Inclusion of income from an immovable property transferred to wife under a trust in the computation of total agricultural income.
2. Validity of trust creation and inclusion of trust property income in assessing agricultural income tax.

Analysis:
The judgment addresses the dispute regarding the inclusion of income from an immovable property transferred to the wife under a trust in the computation of the total agricultural income of the assessee. The Revenue contended that the income must be included despite the transfer due to the provisions of Section 9(2), which deems income derived from assets transferred to the wife by the husband as income of the husband. The assessee argued that the income, being from trust property, should not be included. However, the court rejected this argument, citing clauses (a) and (b) of sub-section (3) of Section 4 of the Kerala Agrl. I.T. Act, which do not recognize the trust created under the deed in question for exclusion purposes under sub-section (1) of that section.

The court further delved into the relevant sections of the Act. Section 9(2) mandates the inclusion of income derived from assets transferred to the wife by the husband in the husband's total income, irrespective of the transfer circumstances. On the other hand, Section 4(1) provides for the exemption of agricultural income derived from property held under trust wholly for charitable or religious purposes, subject to certain conditions. The dispute arose as the Revenue argued that the trust in question was created for private religious purposes benefiting a specific community, thus not falling under the exemption criteria of Section 4(1).

The court highlighted that income derived from property held under trust for private religious purposes, benefiting a specific community, is excluded from the exemption under Section 4(1) by sub-section (3) of the Act. The trust in question specifically aimed to benefit only members of a particular religious community, leading to the conclusion that the income derived from the transferred property should not be exempt under Section 4(1) and thus included in the total agricultural income of the assessee as per Section 9(2).

Conclusively, the court answered the second question in favor of the Revenue, indicating that the income from the trust property should be included in the total agricultural income of the assessee. As a result, the court declined to answer the first question and directed the parties to bear their respective costs in the tax referred cases.